University of Hawaii Economic Research Organization (UHERO) executive director Dr. Carl Bonham said Governor David Ige’s proposed furloughs of state workers to help balance the budget will have a broad negative impact on the economy, slowing growth at the worst possible time.

“We put $300 million of spending cuts into our baseline forecast, it will generate a drop in GDP of probably $450 million. So you get the initial effect of the spending, and then you get those follow on effects of those teachers who just lost two days a month in income, you know, they have to pay their rent, so that 10% cut means they don’t eat out or they don’t spend it somewhere else in the community,” he said this morning on Spotlight Hawaii.

Bonham said one of the key lessons of the Great Recession is that cuts in state spending had a significant impact on the rate of recovery.

“Just when the economy was starting to recover in 2010, 2011, state sort of hit a wall on their budgets and started their cuts. And the federal government pulled back their spending. So if we repeat that we’re going get the same kind of results, and they’re not good,” Bonham explained.

The coronavirus pandemic has had a significant impact on Hawaii’s economy. UHERO estimates that the state has lost 116,000 jobs since the start of the year.

“If you look at where the jobs are being lost, there’s really no good place to be right now,” he said.

That said, while all all sectors are hurting, some, like hospitality and the service industry, are hemorrhaging more jobs than others.

“Restaurants, bar, retail, those are extremely vulnerable to prolonged losses of jobs. But keep in mind one of the key things will be whether or not existing entrepreneurs and new entrepreneurs have access to capital to restart businesses,” he said.

While there is talk of diversifying the economy to pivot away from tourism, Bonham said as it stands now, the visitor industry is Hawaii’s best hope.

“The bottomline is that in the short run the only thing that will make a significant difference in getting people back to work really is bringing back tourists, bringing back tourist dollars.”

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Spotlight Hawaii, which shines a light on issues affecting Hawaii, airs live 10:30 a.m. every Monday, Wednesday and Friday on the Honolulu Star-Advertiser’s Facebook page. Join Ryan Kalei Tsuji and Yunji de Nies this month for a conversation with guests. Click here to watch previous conversations.